IKN #329Premium

The IKN Weekly
Week 329, August 30th 2015
Contents
This Week: Not a big issue today, Explaining the four/five purchases error from last week, And
my enormous typo error in the Flash update Thursday, Gold stocks: Embrace the irrational.
Fundamental Analysis: Minera IRL again (MIRL.L) (IRL.to).
Stocks to Follow: Overview, New Gold (NGD) (NGD.to), Lake Shore Gold (LSG.to) (LSG),
Teranga Gold (TGZ.to) (TGZ.ax), Midas Gold (MAX.to), True Gold (TGM.v), B2Gold (BTO.to)
(BTG), McEwen Mining (MUX) (MUX.to), Focus Ventures (FCV.v).
Copper Basket: Overview.
Low Cost Producer Basket: Overview.
Regional Politics: Southern Copper (SCCO) Tia Maria: The new hearts and minds campaign,
Chile's copper sector calls for closer ties with China, Argentina: Updating the voter intention
polls for the October 25th election.
Market Watching: Deferred.
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
Not a big issue today
It's been a trying week and I'm not going to get around to the type of coverage on events
that's normal today. On the other hand, there was plenty of heavy lifting done last week on the
rare occasion I bought five different stocks. That alone should tell you I'm feeling optimistic
about what's to come as we enter into the September back-to-serious-work period in the
Northern parts of our strange planet.
Explaining the four/five purchases message error from last week
Many of you noticed something about my decision last week to add/buy in five different mining
companies; that in several places in the writings last week I only spoke of four. A quick
confessional/explanation is required.
In fact come Sunday morning the plan was to buy/add in four places, namely TGZ.to and
LSG.to (additions), then NGD and MAX.to (new buys), but as I wrote up the political risk section
on True Gold (TGM.v) I managed to convince myself to take a small piece of that stock as well.
I then set about changing text and script in other places, but frankly I didn't do it very well
(painfully badly in fact, noted when I got round to re-reading carefully the next day what I'd
written in IKN328). In sum, I made it five buys and not four at the last minute, added TGM.v to
the bunch and didn't cover my tracks very professionally.
And my enormous typo error in the Flash update Thursday
On the subject of errors, this one just shook me stone cold when I'd realized what I'd done.
After hearing the news about Daryl Hodges' ouster on Thursday and then considering the
consequences of the newly formed board with Jaime Pinto (see below for thoughts on that) I
sent out the Flash update on Thursday afternoon (as seen in Appendix 1). But it wasn't until
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Friday after the close when somebody pointed it out to me that I saw my error. Instead of
writing what I meant to write at the end, specifically "Anything under 10c is dirt cheap" I in fact
wrote "Anything under 20c is dirt cheap". I apologize, I'm sorry and I feel awful about it. I
didn't even look at a held copy of what I sent until post-bell Friday evening. I can only plead
stupidity and ignorance and all things bad, because I truly meant to write "10c" and not
"20c" as the dirt cheap limit price.
As it happens I don't think any damage was done because the stock topped out at 11c and the
real volume came at 10c, right where I consider the real 'dirt cheap' line to be. But I feel
damned awful about the typo and have no excuses to offer, only a sincere apology.
Gold stocks: Embrace the irrational
In last weekend’s intro piece “It’s brighter for gold stocks”, along with my decision to buy into
five names, I laid out my newly bullish case for the sector. Full of careful reasoning and
infallible logic, your author and dedicated servant to fundamental analysis saw the tide
changing in a definitive manner for the first time in such a long time.
So what went wrong?
Because there's no doubt I got at least the near-term wrong, because I was the chump who
waded in and bought the things I wanted to buy on Monday before the precious metals stocks
decided to drop like stones again (except Midas (MAX.to), which was tough to buy Monday so I
waited until Tuesday).
In fact I don't think anything has gone wrong, but what we saw last week is large doses of one
of the most difficult things to enter into a spreadsheet: Irrationality. To that end I've put
together this chart of the last ten days in 1) GLD (black line) 2) the S&P 500 index (gold line)
and the two precious metals ETFs GDX and GDXJ (blue and red lines) to cover the larger and
the smaller of the gold miner sector.
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As far as I can see, there have been two key moments in the last two weeks for the gold
mining stocks, plus one change in the underlying dynamic. Put them together and the future is
looking rosy for the miners.
1) On Thursday 20th and for the first time in a long time, the mining stocks ignored the
traumas of the broad market and rose sharply as gold moved up. In turn, gold's move was all
about new money making its way in, it was a classic safe haven move (the theory behind which
needs no going over with this sophisticated audience).
2) Then on Monday afternoon, the market's attitude towards mining stocks reverted to type
and the habits of the last couple of years. They sold off as gold started going sideways, but the
strength of the selling in the miners is what really catches the eye. The whole complex
immediately dumped right back down to where the now obviously distressed S&P index was
trading.
3) But as the GLD volume bars show at the bottom of that chart, the renewed interest in
gold (here via GLD, the most liquid way in) didn't drop away. Volumes remained strong and
although gold gave up the best prices, it's still 1% higher than it was a fortnight ago and has
done its safe haven job very well compared with the 5% drop in the S&P.
What I saw while staring at the numbers going up and down last week was a whole world of
irrational behaviour in the gold stocks , and said as much to a few e-mail pals at the time. What
I see while staring at that chart this weekend is a quantification of the irrationality. What the
market hasn't seen yet is that the change in attitude towards the underlying metal will affect
the companies that produce it for a living. Coupled with the improvement in other inputs,
coupled with the new attitude inside mining companies that was summed up beautifully by Gary
T over at his weekly letter today (quote)…
"Sector fundamentals have been coming in line, with gold’s ratio to mining
cost inputs improving, global currency dynamics and even gold mining execs
getting a clue that these should be run as businesses, not as a bunch of kids
playing dump truck out at the dirt pile."
…and those who've been lazily programmed to trade the gold stocks in just-such-a-way over
the last two years are about to get a rude awakening.
Therefore to answer my own question of "What went wrong?": I bought on Monday, I should
have bought on Wednesday. Apart from that we're all good. If there's one thing that a fundies
analysts loves to see, it's an irrational market. Because that irrationality always washes out.
Fundamental Analysis of Mining Stocks
Minera IRL again (IRL.to) (MIRL.L)
I continue to follow this story closely for several reasons, which include:
• I'm a shareholder, I recommend the stock, I want to know what's going on.
• The potential for a tremendous investment advantage once we get to the denouement of
the current drama.
• There are questions of basic morality and justice in play, as the potential for a win-win-win
project that benefits all stakeholders (company, community, shareholders) is ruined by a
small band of greedy self-serving parasites who don't give a damn about the real matter of
building wealth and improving the world, as long as they get theirs. This type of situation
is catnip for a guy like me.
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But I'm also aware that my obsessive nature with any given issue can be detrimental to the
wider coverage of The IKN Weekly on occasion. I see this now happening with the IRL soap-
opera at the moment and although I'm watching the market action carefully and even moving
to participate in it via the new purchases (bullish that I am) the time I've been spending on IRL
recently is a problem when I want to talk more about New Gold, B2Gold and any other
company covered, let alone doing the normal type of DD on other prospects. I'm aware of the
problem and as long as circumstances allow, as of next weekend I plan to cut back on the IRL-
centric nature of both the blog and the Weekly you've seen in the last three weeks. There's
going to be a lot going on the market as from Labor Day and the set-up has "money to be
made" written all over it.
Therefore what I want to do today is cover some of the events of last week at IRL, in the same
type of abridged or expanded note form as in last week's piece. Unfortunately there's' so much
going on that "abridged" still runs into several pages, but ultimately it's a case of trying to cover
as many bases as possible in this complicated story, getting information out there to you (as
well as opinion) and letting you make your own decisions. As an attempt at being concise, this
first part parses the Northern Miner report on the news that Daryl Hodges was removed as
Executive Chair on Thursday (1). What you get is the full NM report in italics, then interspersed
my own comments in normal type. After that I'm going to move beyond a simple parsing of
somebody else's take on the matter and add more thoughts on different aspects of the story
and a preview of what we can expect in the days and weeks to come. Let's begin.
Minera's shareholders boot out chairman Hodges
August 28th
In roughly two weeks, Minera IRL has lost community support of its Ollachea
gold project in Peru, dismissed its interim CEO, and more recently has been
forced to show its executive chairman Daryl Hodges the door.
Fair
The issues appear to have started after Minera’s cofounder, executive
chairman and CEO Courtney Chamberlain stepped down for health reasons in
March. Hodges, who joined in Feb. 2014, took over Chamberlain’s board
duties.
Fair. To add a little extra, despite some specific instructions from Courtney Chamberlain during
his last board meeting that Daryl Hodges should not be given any executive power at the
company and kept as an independent board member, Hodges managed to grab power and ride
roughshod over the other, weak, board members.
In April, Chamberlain, who spearheaded strong ties with the Ollachea
community, passed away.
A month after mourning his loss, Minera appointed cofounder Diego
Benavides as interim CEO. Benavides, a Peruvian citizen and lawyer by
training, previously held executive positions at two of Minera’s subsidiaries.
He also played a role in establishing Minera.
Factual error. In fact Benavides is still the president of the two Minera IRL subsidiaries and
that's something the Hodges camp is desperate to change. To that end, the man brought in by
Daryl Hodges as country manager, Carlos Yrigoyen (who made a complete mess of Lupaka
Gold while there), has already been promoted to "controller" of the company and has been
moving to wrest legal control of the two subsidiaries away from Diego Benavides. I'm not privy
to the exact way in which this is happening, but I've heard "Team Hodges" is going to find it
tremendously difficult and time-consuming to win out on this, even if they manage it at all.
Everything appeared to be on track, with the company announcing in June
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that it had lined up a US$70 million bridge loan and signed a mandate letter
for up to US$240 million to fund the development of the Ollachea project.
Fair.
But in mid-August, community relations turned soured. Juan Luis Valeriano
Gutierrez, the president of the Ollachea community, notified Minera that the
community was withdrawing project support until Minera made management
changes.
Half-truths. As we know (or should by now), the "management changes" demanded by the
community are specifically that Hodges resigns and Diego Benavides is put in charge.
This was a major blow to the gold miner, which had spent eight years
fostering community relations, plus more than US$100 million advancing the
Ollachea project, including around US$25 million on community initiatives.
Fair.
However, the Ollachea community argues Benavides should have chaired the
board after Chamberlain’s untimely death, calling for Hodges to step down.
Factual error. The community of Ollachea wanted and still wants Diego Benavides to be ratified
in his role as company CEO and not to become company chairman. In fact, when I asked
Benavides about this he said that although he'd like to be CEO, he'd prefer not to take a seat on
the board. He'd prefer the board to be one that can control and examine operational decisions
and play an active oversight role.
Without the local support, the company was forced to halt activities at
Ollachea, including a planned 5,000-metre exploration drill program and
finalizing an EPCM contract. It cautioned this might impact the project
financing.
Fair.
Adding to the chaos, Minera reported a week later that its board unanimously
voted to remove Benavides from his interim CEO role. It also noted it was
investigating allegations of impropriety received through its whistleblower
hotline.
This needs a little extra information on two counts, context is important. First, when we read the
phrase "voted unanimously" we are in fact talking about a board of just three people, one of
which was Hodges (now departed), one is a staunch ally of Hodges in his nefarious games of
corporate pillage who was appointed recently by Hodges (i.e. Robin Fryer) and one that's
known to be easy to convince on matters and changes his opinions and viewpoints quite
regularly (i.e. Doug Jones, who was an old friend of Courtney Chamberlain's and now has very
little to do with the company).
Second, the internal IRL "whistleblower hotline" is one big set-up and catch-all excuse that
Hodges and his band are using to justify their actions. The hotline was set up just two weeks
before Benavides was removed. It's an anonymous service, which means anyone can say
anything about anybody and there's nothing to stop one of Diego Benavides' enemies from
making up a whole pack of lies. Also, it's been pointed out to me that under normal corporate
circumstances, nobody is fired due to whistleblower allegations; yes of course people might get
into trouble once those allegations are investigated and proven or otherwise, but to fire a person
just because some anonymous allegation(s) came in is wholly irregular.
That drama continued as Minera announced shareholders at its Aug. 27
annual general meeting voted against four resolutions, including re-electing
Hodges and a 10-for-1 share consolidation.
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Fair.
With Hodges out of the picture, Minera’s remaining two directors — Doug
Jones and Robin Fryer— quickly appointed Jaime Pinto as a new director.
Pinto, a veteran Peruvian lawyer, is currently the principal partner of Pinto &
Abogados law firm in Lima. He’s also a director of Peru’s largest oil refinery,
Refineria la Pampilla.
As mentioned on these pages previously to the meeting, part of the Hodges & Co plan was
always to elect Jaime Pinto to the board of directors once the AGM was done. In fact the rules
of the TSX state that a company must have at least three board members and they were at that
time down to two but the appointment comes as no shock either way. And as mentioned on the
blog last week, we can expect Pinto to be named executive head of the company in the next
few days (though I don't know whether they'll decide on CEO, President or Exec Chair for his
official title).
It's likely that Pinto is part of Team Hodges in this whole affair, but that's not something we
should take as granted either. The man is an experienced Peruvian lawyer and businessman
and isn't stupid by any means. He's also been directly involved with two junior mining projects in
Peru that finished badly because of poor community relations handling, namely Lupaka Gold at
Crucero and the Mantaro phosphates project run by the Sprott vehicle Stonegate. In fact Pinto
was executive chairman of the local company for the Mantaro phosphate project and really was
directly to blame for that particular mess. We can at least hope that Pinto comes with a better
and wiser attitude, explains a few home truths to this board of directors from hell and gets Diego
Benavides back on board to run things in Peru. Maybe that's a little idealistic for my part, but I'm
willing to leave the door open at the moment so that Pinto has the chance to do the right thing.
Minera’s board has started looking for a new CEO. The company says it has
enough management resources in place to continue daily activities.
Minera's current board isn't "looking for a new CEO", they're playing at looking but have already
decided on their man. It's Pinto.
Minera shares closed Aug. 28 down 14% at 9¢, after doubling to 10¢ a day
earlier.
Fair.
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That ends the parsing of the NM piece, now for some more information and thoughts. These are
semi-related thoughts and sometimes non-sequitur, consider them expanded notes. They
include things I know, things I believe, things assumed and things at which I can take an
educated guess.
1) The plan hatched by Daryl Hodges and his close friend Chuck Higgins of Fasken took a hit
when shareholders voted down Daryl Hodges last week, but they haven't given up yet, not by a
long chalk. But however things go in the days and weeks to come, be clear that the coup d'etat
plans hatched by the two-faced Hodges and his cohorts (start with Fasken's Chuck Higgins)
have been dealt a mortal blow. When it comes down to it all, the root cause of the pushback
and eventual unravelling of the Team Hodges plan is found at the town of Ollachea, among
people who saw straight through the new guy and simply refuse to have anything to do with
him. If by changing the man at the top they think they can fool the Ollachea community into
believing it's all different, they're wildly mistaken.
2) Team Hodges will promote Jaime Pinto to a position of executive power next week. They'll
use this as an answer to one of the blocking points raised by several quarters, that Hodges
wasn't equipped to be a chief in Peru and didn't understand the local reality. Pinto is Peruvian,
lives in Peru, has plenty of executive experience in the country and ticks the boxes for
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marketing purposes. As noted above in the NM report parsing, I hold out some hope that Pinto
may turn out to be a smarter person than the rest of Team Hodges and may bring a measure of
calm to a company that's in desperate need of some. However, at this time it's necessary to be
very skeptical of Pinto's position.
3) Remembering basic facts around this whole affair is important. Such as how keen Daryl
Hodges was to scoop up a $100,000 bonus for closing the COFIDE deal, even though he did
basically nothing over the 18 months in which it was negotiated and merely had the good
fortune to be in the right place to rubberstamp the deal at the very end. A person who plays an
underhand trick like that and then tries to promote his agenda as the one that will bring
accountability and transparency to IRL is two-faced to say the very least.
4) Shareholders, i.e. you and I, should pay close attention to the clearest indicator there is about
the future of the share price. With Hodges in
charge, the stock price was pummelled down
to five cents. When Hodges was removed, the
stock jumped 120% to 11c on the same day.
When doubts began to re-appear on Friday
about the role and the intentions of the
Hodges controlled board of directors, the
stock sank back to 9c. Although the most
basic of indicators in a politically charged
situation such as this, it's not something that
should be ignored either.
5) Here's some word from Ollachea, supplied
once again by my now proven reliable source
on the ground there. Last week the Hodges side of IRL tried to start a campaign in Ollachea to
try to get at least a portion of the locals on their side. They did this by trying to set up a direct
line that would allow townsfolk access to the company and its viewpoints without going through
the community council (notable echoes of the internal Minera IRL whisteblower hotline set up by
Hodges and also the one he set up at Jennings when CEO there which caused the same type
of ill-feeling to ariseCat least one pattern is clear in this scumbag's M.O.). They also published
the letter Hodges sent to the president of the Ollachea community (see blog August 26th (1a))
in one of the local papers (and for what it's worth submitted the letter before delivering it to
Ollachea community president Valeriano) and then via non-community team people in IRL
(specifically two geologists) they distributed flyer copies of the "Hodges IRL" position to locals in
the main square that Wednesday evening. The community were extremely offended by the way
in which IRL went behind their backs and refused to use the official communication channels, to
the point when the two IRL geologists were summoned to a "community justice court" the
following day. As what normally happens at those events under these circumstances is that the
offending people are first punished by some sort of corporal punishment (typical are using small
and painful hand-held whips on their body, or forcing the guilty to march barefoot several
kilometres) and then thrown out of the town, the two IRL geols decided to escape that evening
rather than show up at their appointment the next day. They high-tailed it out the town late night
and were in the city of Juliaca the next morning.
Another example of this band of greed-fuelled crazies that we can group as "The Hodges IRL" is
how they've appointed Carlos Yrigoyen as controller of the company. In his job at Lupaka Gold,
while running the Peru operations, he decided to file criminal proceeding against people
opposed to the Crucero project. The result was to turn the whole community against the
company and he was eventually fired for his efforts.
All this is recounted to give you an idea of how bad the community relations operation run by
Hodges & Co has become. These people, be they Canadian, Peruvian or from anywhere else,
have trampled all over the good community relations work done by the professional comm-rels
people on the IRL team (all through the Benavides era, with the demonstrated excellent results),
have no idea what they're doing and will try anything to cause a rift in the staunch opposition
they're faced with in Ollachea. Team Hodges hatched a sneaky plan and on the corporate side
it's been well-executed so far, but they didn't realize how important the town of Ollachea and its
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opinions are to the whole project. They're now scared of the consequences, they're scared of
the way their plan is unravelling because of the high esteem Ollachea had for Courtney
Chamberlain (RIP) and Diego Benavides and they're going to try anything and everything to
remedy their serious strategic error.
6) As noted on the blog Friday (2) I believe we're about to get a whole bunch of trumped-up
charges and plain lies levelled at Diego Benavides the man. They may turn out to be he-said-
she-said things or easily refutable, but I think what the Hodges side is banking on is to be able
to cause damage to the strong reputation Benavides enjoys in the local community.
There is another side to the "we attack Benavides" strategy that's about to roll out: If the right
sort of accusations are made (and let's see how things happen on this) it may hamstring
COFIDE into non-action. As Camp Hodges fears the reaction of COFIDE, particularly if they
decide to call in their $70m loan and freeze all treasury movements.
Finally, I'll say here that although my information source for this is very good I hope I'm wrong
about the personal attack angle because it will also reveal the position Jaime Pinto wants to
take. If unfounded accusations get made against Benavides by the company, there's no turning
back afterwards and no way that the board of directors can change without being 100%
changed.
7) One person who's definitely in league with Daryl Hodges/Chuck Higgins is the new director
Robin Fryer. As a matter of fact, his only other directorship at the moment is with a mining
company called Shanta Gold (SHG.L), a small producer and exploreco listed in London and
operating in Tanzania. The non-executive chair of Shanta is on Anthony Durrant and here's part
of Durrant's website biography (3):
"He is currently Chairman of the Investment Advisory Committee of New York
based Arias Resource Capital Management (ARC Fund), which manages
private equity funds investing in Latin American mining."
As it happens, back in January one Napoleon Valdez resigned as a director of Minera IRL (4).
At that time Courtney Chamberlain was still in charge and as I now understand, the financing
deal was just about done and dusted between Minera IRL and COFIDE. This turn of events
upset Valdez greatly, because throughout the process he'd been very keen on IRL doing an
alternative financing deal with Arias Resource Capital, either as brokers between COFIDE and
IRL or as the main financial entity (cutting COFIDE out the deal).
Perhaps the connection between Valdez, Fryer and Arias Resource Capital is purely
coincidental. I don't believe in coincidences. Especially when the investment fund in question
makes no secret of wanting to move into gold projects at the moment and has Peru as its main
target location (the Arias family are Peruvian). And that they've already tabled offers to Minera
IRL that were rejected. I have been told by people who were close to the negotiations at the
time that problem with ARC Fund is that their offers were ultimately unfriendly for shareholders,
with a structure that would have taken away a lot of the blue sky and delivered it to the
financiers rather than equity holders. A direct deal with COFIDE was always considered by
Chamberlain as a better alternative and it put a lot of noses out of joint when the COFIDE deal
solidified.
8) It's worth noting at this point that of the 231 million shares out in Minera IRL, Daryl Hodges
owns 215,000 shares, Douglas Jones owns 322,936 shares and Robin Fryer owns zero shares.
Up until Thursday morning those three were the board of directors at IRL and considered
themselves with ultimate control over the company's destiny. It must have been quite a shock
for them to watch as Hodges was voted out by more than 91% of votes, but impressively they
have decided to ignore the shareholders' collective voice and continue with their plan to ransack
the company at those same shareholders' expense.
9) I don't know all there is to know about this dirty and sad IRL saga, not by a long way. I've
been able to glimpse behind the curtain on a couple of occasions and unlike the foolish Hodges,
I've always understood the fundamental importance of the stakeholders we know as the
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community of Ollachea. What seemed to Hodges as a simple bunch of uneducated townsfolk
have shown themselves to be far more intelligent than a stuffed suit from Toronto (after all,
intelligence and education are two separate subjects; one is far more important to have than the
other). But I'm sure there are other moving parts to this story that I don't know about, and others
still where I haven't got an inside track on the information and need to make educated guesses.
Which is why I'm going to share some excerpt from a mail (one of many, unsurprised) received
last week from reader JH, because he managed to nail many of the main incognitos. Here are
four snippets from JH's mail (I've artificially labelled them with numbers to help the answering
process below):
1) "CI'm a bit surprised the whole board was not thrown out at the AGM. The result
and the subsequent nomination of Pinto makes it look like a set up. The chairman was
thrown out as a sacrificial lamb, because his situation was untenable but in fact no
change.
2) "Are the details of the vote available somewhere? Question is how many of the
90% of votes who were against renewing M.Hodges were in fact against what is
happening?
3) Why vote against share consolidation, and why against the issue that would allow a
debt to be paid?
4) "The only way out would seem to be for outside shareholders to call for an EGM
and propose an entirely new slate of directors. In fact, how come there was no proxy
move to propose that at the recent meeting?"
As stated, I don't have special information on any of those, but I do have opinions.
To answer 1) and 2) in one go, I don't know (because I haven't asked him and if I did he
probably wouldn't tell me) but I think Diego Benavides specifically went after Daryl Hodges and
only Daryl Hodges last week at the AGM, knowing that the other board members were also
Hodges' allies. I think Benavides was testing strength of shareholder opinion for his position. If
so, by getting over 91% of voters to vote against Hodges (by the way, Rio Tinto abstained) he
scored a resounding success.
To answer 3) I think the 10-1 rollback consolidation was voted down for two reasons. Firstly
because it was an idea that came from the desk of Hodges and its loss removes some power of
executive decision from The Hodges Camp. As another mailer "RK" opined, part of the Hodges
Camp plan probably included the award of large lumps of post-consolidation options (that
makes sense, RK). Secondly because the COFIDE deal, in which up to $240m gets raised,
would mean that no more cash is needed to build Ollachea. By defeating the rollback item, the
message is that there's no further dilution on the way.
To answer 4) I totally agree that a new EGM is necessary. As I understand things, shareholders
have 21 days after the close of the AGM to call a new AGM/EGM and I'd like to think that the
'Benavides Camp' is going to take advantage of that window.
We're today faced with a board that's making unpopular decisions to serve its own agenda,
paying no heed to shareholder will. Thursday's move to add Jaime Pinto to the board (it was
pre-programmed of course, I'd already told you they'd add him come what may) right after the
ouster of one of the coup d'etat's ringleaders (91%!) shows how little they care about
shareholder opinion and how desperate they are to forge ahead. I don't know whether the proxy
slate will appear but if it doesn't, I'd need a damned good explanation from Diego Benavides as
to why he didn't put one together and wrest control of IRL from the people intent of destroying
its value for their own ends.
Conclusion: There's a lot of in-house and in-company politics going on here and some of it's
very nasty stuff too, with the high chance the attackers are going to try and trun up the heat
even higher in the days to come. But essentially the story hasn't changed in the three weeks
we've now been covering it carefully.
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Without Diego Benavides leading up IRL, almost certainly as CEO, the people of Ollachea will
not allow the project to continue.
When it comes right down to it, that's a basic truth that the nefarious Team Hodges is faced with
and cannot ignore.
Without Diego Benavides, the COFIDE financing deal collapses. As that deal is better for
shareholders than anything Team Hodges has planned that's why shareholders will do the will
of COFIDE and not Team Hodges. We've seen ample evidence of that in the stock price
movements there last few days.
Notably (and if we take him at his word) Benavides doesn't want to be a board member. For
sure he wants to head up the Peru team that builds the mine, but he's clear about the need for a
truly independent board that can supervise things well.
When Hodges was in charge, he already showed how he would strip the company for his own
benefit by taking that $100,000 bonus. He oversaw the rapid deterioration of the company's
political and community capital at Ollachea and just by replacing him with one of his stooges,
nothing's going to change. They seem to think that they can adjust a face at the top and smooth
things over, it's not going to happen folks. This is why I was so confident about calling IRL a buy
on Thursday afternoon. I'm fully aware Team Hodges wasn't about to roll over and die on just
one reversal, they're ready to fight (gossip from Toronto tells me Hodges, now unemployable in
the brokerage world, is in financial straits and desperate for a job that pays good money quickly)
but those that would wrest Ollachea away from its stakeholders have failed to take into account
that this isn't a simple story of corporate control.
Stocks to Follow
In a week when gold corrected back from a safe haven peak, the newly expanded 'Stocks to
Follow' list didn't do that badly and when you compare the performances here to what you'll
see in the Producer Basket below, you'll see that it could have been a whole lot worse. Of our
16 names four made gains (TGZ.to, NGD, FOS.to, IRL.to) and another four remained
unchanged (SAM.to, ATM.v, TGM.v, REG.v), which leaves eight stocks that returned a weekly
loss (BTO.to, LSG.to, MUX, LGN.v, LRA.v, DNA.to, MAX.to, FCV.v). Best winner by quite a way
was Minera IRL (IRL.to up 28.6%) and considering it rallied from 5c on the day Hodges got
kicked out, that was an eye-catching performance against the grain of the market. Worst
percentage loser was Legend Gold (LGN.v down 25%) which hurts pride more than back
pocket. I'm considering dumping it as a bad cause.
With the additions of TGM.v, MAX.to and NGD we now have 16 open positions in our 'Stocks to
Follow' list, one more than my usual self-imposed maximum number. It’ll be a temporary thing.
10

company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICK
B2Gold BTO.to STR BUY C$2.17 12-sep-14 C$1.62 -25.3% Top Pick, 1st tgt $2.70
Metals Producers (in current order of preference)
Lake Shore Gold LSG.to str buy C$1.07 07-abr-15 C$1.14 6.5% Added Aug, M&A tgt, bullish
Teranga Gold TGZ.to str buy C$0.57 15-feb-15 C$0.62 8.8% Added Aug, 83c tgt
McEwen Mining MUX hold U$1.09 25-ene-15 U$0.865 -20.6% Recovering from lows
New Gold NGD buy U$2.18 23-ago-15 U$2.24 2.8% New cheap gold play, leverage
Starcore Intl SAM.to spec buy C$0.12 10-ene-15 C$0.105 -12.5% Also "land grab", tgt 19c
Land Grab Stocks (in current order of preference)
Phoscan Chem FOS.to hold C$0.28 29-mar-15 C$0.27 -3.6% 36c/share of cash, can add
Atacama Pacific ATM.v hold C$0.19 26-abr-15 C$0.145 -23.7% Spec buy, cheap adv proj
Legend Gold LGN.v hold C$0.085 01-mar-15 C$0.03 -64.7% Spec buy, v small, not working
Lara Expl. LRA.v spec buy C$1.15 08-abr-12 C$0.23 -80.0% solid biz model, LT hold
Other Recommended Stocks (in current order of preference)
Dalradian Res DNA.to hold C$0.64 27-oct-13 C$0.84 31.2% Nov'14 tgt $1.25, top Au expl
Minera IRL IRL.to spec buy C$0.195 22-jul-12 C$0.09 -53.8% another buy, key AGM this wk
Midas Gold MAX.to spec buy C$0.39 23-ago-15 C$0.37 -5.1% new near-term trade flip
True Gold TGM.v spec buy C$0.18 23-ago-15 C$0.18 0.0% improved pol risk, sm trade
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.195 -15.2% tgt 50c, 3q15 PEA
Regulus Res REG.v spec buy C$0.30 06-abr-15 C$0.27 -10.0% Bet on 2016 drill prog.
Closed in 2015 closed close price
Argonaut Gold AR.to jan'14 C$1.47 14-dic-14 C$2.53 72.1% Big gain small time, profit taken
Amerigo Res ARG.to jan'14 C$0.405 20-jul-14 C$0.285 -29.6% Given up on weak Cu prices
Reservoir Min. RMC.v jan'14 C$6.05 18-jun-14 C$4.12 -31.9% sold on Cu downturn
Coro Mining COP.to jan'14 C$0.075 26-ene-14 C$0.035 -53.3% sm, sold on Cu downturn
Fortuna Silver FSM mar'15 U$4.12 10-nov-14 U$3.75 9.0% Short used as hedge
GoldQuest Min. GQC.v mar'15 C$0.26 27-oct-13 C$0.085 -67.3% given up ghost
Rio Alto Mining RIO.to apr'15 C$2.30 07-abr-11 C$3.57 55.2% Top pick, bot out, big win
Timmins Gold TGD jun'15 U$0.60 19-abr-15 U$0.62 3.3% near-term trade, out of time
First Majestic AG jul'15 U$10.51 10-ago-14 U$4.55 56.7% horrible failed trade
NovaCopper NCQ.to jul'15 C$1.05 09-abr-14 C$0.50 -52.4% no more Cu exposure, sm sell
McEwen Mining MUX aug'15 U$0.695 21-jul-15 U$0.92 32.4% Closed nearterm flip for win
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Now for some notes on current basket stocks.
New Gold (NGD): Position opened.
I thought I was clever to get in on
Monday at U$2.18 on the drop, which
turned out to be an expensive error. As
noted in today's intro, my mistake was
buying two days too early and not on
Wednesday (which is a comment that
applies to many of the stocks and
charts in today's segment).
But in the case of NGD, immediate help
was at hand thanks to the news out
Thursday (5) that NGD had sold its
30% free carry portion of the El Morro
project in Chile to majority owner
11

Goldcorp (GG), in a deal that forms part of a larger link-up deal between GG and Teck to pool
resources on El Morro and Teck's nearby (40km) Relincho copper project. For more details on
the deal, baptized "El Corredor" (The Corridor) in Chile there are a host of words available out
there, or just check the NGD NR linked. What we care about here is NGD:
And on that score the news was pretty good. NGD agreed to sell its El Morro 30% for U$90m in
cash and a 4% lifetime NSR on gold production at El Morro. For the record, that compares to
the net $191.3m carry value NGD had ascribed to its 30% of El Morro so we can expect the
company to take an impairment come the next set of financials, but the fact that NGD rallied
hard on the news and managed to deliver a net weekly win to even my badly timed Monday
midday purchase is testament to the positive vibes it created.
The reasons to be cheerful are twofold. First the cash, which when added to the $465m in net
working capital as at end 2q15 and the $175m streaming deal for silver that NGD struck with
Royal Gold since the end of the last quarter, means there's this sort of cash lying around at the
company now: $465m + $175m + $90m = $730m. As the estimated capex spend left to make
on the big Rainy River project as at end 2q15 was $757m, what we see here is NGD all-but
tying up the capex it needs to build its company-maker mine. For sure there are details that
work either side of that global capex number, for a potentially negative example only $100m of
that Royal Gold cash is immediately available, for a potentially positive example the
Loonie/Greenback forex changes suggest things are getting cheaper to build than NGD's current
estimates. But overall and at a pinch, it's fair to say that NGD now has the capital in place.
The second reason to be cheerful is that 4% NSR on gold from El Morro because that's a very
tasty little asset to tuck away for a rainy (river) day. I've seen all sorts of ideas on what that
NSR may be worth, either to NGD once the mine is built or as an item it could sell to one of
these big swinging streaming companies who just love such things. Perhaps the best overview
came from Scotia last week, who considered the timeline to production at El Morro at 10 years,
then considered different scenarios where NGD sold the NSR closer to now or closer to the first
year of production. They modelled different average gold price scenarios and used a correctly
conservative 10% discount rate for their valuations. Once they'd crunched the numbers, they
came up with a NAV of $38.8m at U$1,200/oz gold and that kind of number passes the smell
test. As for a re-sale value to a streaming or royalty company, Scotia thinks that the NSR could
go for $75m in these days and be worth around $135m on day one of production. I think those
numbers are a little rich, but wouldn't bat an eyelid to see NGD book that asset at $50m come
the next set of financials (thereby taking a rough $50m assets hit). That would imply a 0.74X
price book ratio and if you check back at the NOBS report analysis I did on NGD in IKN321,
that's right in the ballpark where I'm valuing NGD today (i.e. significantly more than the market
is doing at its current U$2.20 or so.
I haven't pasted anything of that Scotia analysis here, but if anyone would like a look just shoot
me a mail and I'll send it over.
Lake Shore Gold (LSG.to): Added. The
cost average has clicked up slightly to
$1.07 after my addition purchase of last
week. In general terms LSG traded with
the market average and didn't bring any
news of its own to the table.
Teranga Gold (TGZ.to): Added. In the
same way as for LSG, my cost average
has now risen slightly for TGZ (from 55c
to 57c) but seriously folks, 60c or below
for what TGZ has to offer is a steal. I've worded this one to within an inch of hospitalization the
12

last couple of weeks, the story here is the improving production is now getting financial back-up
from lower costs and margins are improving nicely.
Midas Gold (MAX.to): Position opened. This
one, my "trying to get cute with a pump
prospect", has its limited shelf life of one calendar
month. I'm going to be out by September 30th at
the very latest, win lose or draw.
True Gold (TGM.v): Position opened. The
news we covered last weekend on the blog about
the start of the oversight committee made the
English trade press last week in several places and
when it did, TGM bucked the sector trend for a
while and traded up to 19c. Friday saw it close at 18c, it looks like a strong floor level there,
that's why I bought it. TGM now expects first pour in April 2015.
ne, but for the details this time check out
'Regional Politics' below.
B2Gold (BTG) (BTO.to): We continue with
the raft of ten day straight price charts here,
and yet again the story is how Wednesday, not
Monday, has the look of the bottom day.
Succour comes from recognizing BTO is some
10% higher than two weeks ago, which is the
type of performance you want from a sector-
leader stock (and of course one's own largest
position in any junior).
13

McEwen Mining (MUX) (MUX.to): But of all the stocks I follow, MUX showed the highest
beta last week. I was tempted to get cute on its on Wednesday and buy one again at the price
I'd bought my successful trade-flip recently. It was nearly possible too, with the bottom of the
dip at 71c on Wednesday. But I'd already shelled out quite enough cash on equities by that
time last week and decided against it, which turned out to be more fool me (again) as the stock
rebounded over 20% from its lows come the close on Friday.
No big complaints, just a small sigh of lost opportunity. As the Hamlet guy said in act 3 scene 1
of that play:
Thus conscience does make cowards of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.
I'm guilty as hell about that one, more times than I'd care to remember.
Focus Ventures (FCV.v): The news last week that announced the arrival of a new director
was more important than the news last week (which I failed to pass on in IKN328) about the
new 43-101 resource estimate (6). In fact the resource estimate came with no surprises. So we
go straight to the interesting news, out on Tuesday August 25th (7) that a certain Bert Quin has
joined the company. Once you read the man's background and biography it couldn't be clearer
what the plan is here; FCV is more decided than ever on going to DAPR (direct application)
route to production and is less concerned about the big capex grand plans for the project that
would eventually see it selling out to one of the world's big mining concerns. And once again I
voice my complete support for this plan, the idea of moving forward and getting to cahs flow in
an economic and very profitable way that can then be multipled in module form at the same
project makes oodles of economic sense.
What Quin brings is expertise at both ends of the pipeline, with long-term experience in very
location (the Bayovar/Sechura peninsula) where Bayovar12 is located, plus the key experience
of finding and supplying customers and end-users in overseas markets (in his case New
Zealand). I couldn't think of a better fit for FCV at the moment.
In trading, FCV continues to flatline.
The Copper Basket
After thirty-five weeks of 2015 The Copper Basket is showing a 29.88% loss to level stakes.
14

5% The Copper Basket 2015, weekly evolution
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
15
ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dn22 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 dr3yam ht01 ht71 ht42 ts13 ht7nuj ht41 ts12 ht82 ht5luj ht21 ht91 ht62 dn2gua ht9 ht61 dr32 ht03
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 236.81 0.62 -69.5%
2 Reservoir Min. RMC.v 3.96 47.55 194.00 4.08 3.0%
3 NGEx Resources NGQ.to 1.17 187.71 116.38 0.62 -47.0%
4 Nevada Copper NCU.to 1.65 80.5 86.94 1.08 -34.5%
5 Copper Fox CUU.v 0.135 402.96 66.49 0.165 22.2%
6 Amerigo Res ARG.to 0.27 173.65 43.41 0.25 -7.4%
7 NovaCopper NCQ.to 0.58 60.15 40.30 0.67 15.5%
8 Western Copper WRN.to 0.68 93.68 39.35 0.42 -38.2%
9 Hot Chili Ltd HCH.ax 0.16 333.11 33.31 0.10 -37.5%
10 Panoro Minerals PML.v 0.295 220.64 25.37 0.115 -61.0%
11 Regulus Res REG.v 0.35 56.39 15.23 0.27 -22.9%
12 Metminco MNC.ax 0.008 2650 13.25 0.005 -37.5%
13 AQM Copper AQM.v 0.06 141 5.64 0.04 -33.3%
14 Catalyst Copper CCY.v 0.305 31.41 4.24 0.135 -55.7%
15 Coro Mining COP.to 0.045 159.37 3.98 0.025 -44.4%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg -29.88%
The overall basket dropped again, losing another near percentage point (0.9%) and inside the
global result we saw five winners (NGQ.to,
RMC.v, WRN.to, MNC.ax, CCY.v), three
stocks unchanged (PML.v, REG.v, COP.to)
and seven stocks come in as losers on the
week (CS.to, NCU.to, CUU.v, ARG.to,
HCH.ax, NCQ.to, AQM.v).
In fact most moves were small, inside
recent trading ranges and on low levels of
source: IKN calcs
volume, a commentary that even works for
the big percentage-only moves seen in
Metminco (MNC.ax up 11.1%) to the upside
and AQM Copper (AQM.v down 11.1%) to the
downside. The exceptions to that rule were the
drops in Capstone Mining (CS.to down 11.4%)
and Nevada Copper (NCU.to down 7.7%).
Capstone in particular looks like it's in a lot of
trouble.
As for copper metal price action, it stared down
both barrels of a particularly nasty double-
barrelled gun. On both Monday and Wednesday
copper sank below the psychologically
important U$5,000/tonne line, but to its credit
(and on news construed as bullish from China,
that the government had started propping up
its stock market by buying stocks itself) copper
staged a sharp recovery overnight Thursday
and kept the rally going to the close on Friday.
This weekend sees the highest closing price
since August 14th. It has the look of a reflexive
move and as I noted on the blog last week, we
were getting to the point where the ratios between gold and other metals (or commodities) was
getting so out of kilter that it was likely to affect upside in our preferred metal (the precious
one). I'm good about seeing copper recover somewhat but I'm still not under any illusions, it's a
long way from any sort of price conducive to decent share price action.

We move to inventories and as this weekend is almost-not-quite month's end (by a day) we'll
take our regular monthly reading and update the tracking charts today
There's not much in the way of new news in the figures for August, the trend for rising stocks
has continued and the most notable trend is that LME stocks are at their highest level since
December 2013. That feels like a generation ago in this market.
Now for the regular weekly inventory bullet points:
• Total world copper stocks moved up for the third week running. This time the move
was a larger 18,875 metric tonnes (mt) (+3.7%) to finish the week at 527,057mt.
• Shanghai Futures Exchange stocks dropped slightly and though we can't read too much
into a single week, the chart below suggests we may be entering the type of holding
pattern the Chinese market would need to sustain prices. The drop was small at 797mt
(-0.6%) to finish at exactly 123,223mt.
• However, the signal from the LME stocks is wholly bearish. They moved up by a large
17,425mt (+4.9%) to finish at 371,250mt.
• Comex warehouses also moved up, this time by 2,247mt (+7.4%) to 32,584mt.
Here's the key Shanghai-only tracker chart
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
16
31'13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1enuj ht51 ht92 ht31 ht72 ht01 ht42 ht7 ts12 ht5tco ht91 dn2von ht61 ht03 ht41 ht82 ht11 ht52 ht8 dn22 ht8 dn22 ht5rpa ht91 dr3yam ht71 ts13 ht41 ht82 ht21 ht62 ht9 dr32
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
Mt Cu
source: Cochilco
and the slow return of stocks to the SHFE continues. The acid test will come in September
when the Northern world gets back to work. We're Labor Day minus eight days and counting.
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua
Copper inventories, per month 2012-2014
1000000
LME Shanghai Comex
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua
Mt Cu
LME Shanghai Comex
source: Cochilco

The Low Cost Producer Basket
After 35 weeks, the 2015 Low Cost Producer Basket is showing a 23.67% loss to level stakes.
company ticker price 1/1/15 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 18.52 830 11.60 13.97 -24.6%
2 Newmont NEM 18.90 528.08 9.06 17.16 -9.2%
3 Barrick ABX 10.75 1164.67 8.30 7.13 -33.7%
4 Franco Nevada FNV 49.19 156.5 6.83 43.63 -11.3%
5 Agnico Eagle AEM 24.89 214.12 5.26 24.57 -1.3%
6 Silver Wheaton SLW 20.33 403.75 5.00 12.39 -39.1%
7 Kinross KGC 2.82 1146.2 2.10 1.83 -35.1%
8 Buenaventura BVN 9.56 254.19 1.66 6.54 -31.6%
9 B2Gold BTG 1.62 926.68 1.14 1.23 -24.1%
10 Pan American PAAS 9.20 151.64 1.02 6.73 -26.8%
all prices in U$, using NYSE ticker prices Portfolio avg -23.67%
They all went down, with the least worst being B2Gold, the worst being Kinross (KGC down
11.7%) and some particularly big hits taken by the biggest sector stocks such as Goldcorp (GG
down 9.8%) and Barrick (ABX down 11.0%). The basket average drop with 6.05%.
The Low Cost Producer Basket: Weekly performance
30% and comparative to GDX control
20%
10%
0%
-10%
-20%
-30%
-40%
17
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 dr3yam ht01 ht71 ht42 ts13 ht7nuj ht41 ts12 ht82 ht5luj ht21 ht91 ht62 dn2gua ht9 ht61 dr32 ht03
basket
gdx control
source: Google Finance, IKN calcs
Low Cost Basket: Percentage difference between
3.0% basket and GDX control, 2014
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 dr3yam ht01 ht71 ht42 ts13 ht7nuj ht41 ts12 ht82 ht5luj ht21 ht91 ht62 dn2gua ht9 ht61 dr32 ht03
|
source: ikn calcs, NYSE/Nasdaq data
Regional politics
Southern Copper (SCCO) Tia Maria: The new hearts and minds campaign
This weekend Óscar González, chief executive of Southern Copper (SCCO), announced (8) that
as from September 1st (i.e. Tuesday) the company was embarking on a community relations
program in the Tambo Valley they're calling "Plan Re-Encounter" (Plan Reencuentro), in which
the company will go door-to-door all the population centres of the valley next to its
controversial Tia Maria copper project in order to explain to locals the series of initiatives that

will benefit the local community that the company is looking to implement. As well as the series
of community outreach programs they have in mind, González underscored that the company
was still willing to make available to local municipal coffers the sum of 100 million Soles (approx
U$30.5m), cash that would comes (quote translated), "without any condition and would be
handed over immediately".
Chile's copper sector calls for closer ties with China
Sergio Hernández, the Executive Vice-President of Cochilco, last week (9) delivered a the
keynote speech in Beijing during China's "Chile week 2015" seminar. In it he called on both
countries to work on creating closer ties at a diplomatic and business level.
Hernández's main thrust was to call for a strategic alliance between the two countries based on
copper, the main commodity of exchange between the two countries. In his words (translated),
""The biggest copper producer in the world, Chile, with 32% of world production and with 30%
of its reserves and China, with 47% of world consumption of copper, need each other because
both these positions of privilege in supply and demand respectively will continue to be occupied
by each country for a long time to come."
The main message came later in his speech (quote again translated): "Greater determination is
needed to promote a strategic alliance between the two countries to which China beings
demand, transfers of technology and innovation, financing and eventual investment, while Chile
as a great and successful destination for mining brings production, mineral reserves and all its
comparative advantages such as institutional and political stability, judicial certainty, the
strength of its macroeconomic indicators, the seriousness of its fiscal policies and its industrial
experience."
The overall delivered by Chile to China last week certainly had a lot of normal diplo-talk about
it, as the relationship between the two countries has been reasonably solid for many years. But
at least part of the message was aimed at the agenda being set by China in other countries,
particularly in Peru. It's no secret that China has spent big money on developing large-scale
copper projects in Peru recently (Las Bambas, Toromocho) while in Chile they've been more
interested in straight trade of the finished products. Last week was about changing China's
attitude and trying to attract the business investment dollars into Chile.
Argentina: Updating the voter intention polls for the October 25th election
As mentioned previously, just about the best place to keep a pulse on Argentina voter intention
polls is the Andy Tow blog (the
country's answer to Nate Silver)
and on the main Presidential
election survey poll page at his
site (10) this is the snapshot of
the main chart that collates all
surveys from all pollster
companies in Argentina, today
Sunday:
We've negotiated the PASO
phase of the election cycle,
Daniel Scioli (of the current
Cristina FpV party has kept his
clear lead over the right wing
Mauricio Macri (and if anything
he's trending slightly higher).
18

Market Watching
Nothing this week. The real motor will be the interaction between gold, the gold stocks and the
influence of the broader markets on those gold stocks. I've gone over my bullish position in
today's intro on all that.
Conclusion
IKN329 is done, we end with bullet points:
• The bottom line to last week's market, as far as my interaction with it goes, is that I
bought two days too early but I'm fine about that over the longer haul. We're at the
start of a new cycle for the sector, things will be choppy for a while and we can't expect
the market to bow to the gods of logic immediately. While the current phase continues
we're going to get plenty of trading opportunities for those of you smarter than I about
that type of action, but the bottom line is that now is the time to get longer.
• We're near summer's end, the market's about to put its serious face back on, the
promotional pushes are typically started around now. That's why I'm long MAX.to of
course. Choose your poison.
• The Minera IRL saga won't be cut and dried just yet, there's bad blood and egos in play
as well as an awful lot of money. But be clear, the ouster of Daryl Hodges last week
(not to mention the margin of his disapproval) was the beginning of the end. What IRL
needs is a decently populated, neutral board that can oversee the company's
operations and construction phase in Peru. What it has at the moment is the
boardroom from hell. That will change, be in no doubt, and that's why the current
window is an excellent buying opportunity.
• The NGD news last week was particularly welcome. More please, Market Gods.
I thank you in advance for any feedback. Our Top Pick stock is B2Gold (BTG) (BTO.to). Flash
updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
Footnotes, appendices, references, disclaimer
(1) http://www.northernminer.com/news/mineras-shareholders-boot-out-chairman-hodges/1003702411/
(1a)http://www.incakolanews.blogspot.com/2015/08/minera-irl-irlto-mirll-liar-daryl.html
(2) http://incakolanews.blogspot.com/2015/08/minera-irl-mirll-irlto-daryl-hodges.html
(3) http://www.shantagold.com/about-us/board-of-directors
(4) http://www.marketwired.com/press-release/minera-irl-announces-director-resignation-tsx-irl-1984687.htm
(5) http://finance.yahoo.com/news/gold-announces-sale-el-morro-115800463.html
(6) http://finance.yahoo.com/news/focus-delivers-updated-expanded-bayovar-123000537.html
(7) http://finance.yahoo.com/news/focus-ventures-engages-fertilizer-expert-123000393.html
(8) http://gestion.pe/empresas/southern-pondra-marcha-plan-dar-informacion-puerta-puerta-sobre-proyecto-tia-maria-
2141329
(9) http://www.cochilco.cl/
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(10) http://www.andytow.com/blog/borra/?compe=Presidente%201ra%20Vuelta&pop=Nacional
Appendix 1: Flash update dated Thursday August 27th
Good Thursday afternoon, just before 2pm local time, the markets close in one hour.
Just a quick word and two points about Minera IRL (IRL.to) (MIRL.L):
1) There will be a full report on today's news and the ramifications of it all this weekend in IKN329.
http://finance.yahoo.com/news/minera-irl-limited-reports-agm-154020331.html
2) Minera IRL is a buy on today's news. Anything under 20c is dirt cheap. (EDIT: SHOULD HAVE READ 10C)
Best, O
Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dic-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO feb'14 U$13.10 08-abr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-ene-14 U$4.12 16.7% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
Santacruz Silver SCZ.v sep'14 C$1.04 26-ene-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-abr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
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Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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